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It seems like you have checked most of the common configurations, but there might be some other factors that could be causing the issue. Here are a few additional things you can check:
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Network ACL (NACL): Double-check the Network ACL associated with the public subnet in your default VPC. Ensure that the inbound and outbound rules allow SSH (port 22) and ICMP traffic (for ping).
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Internet Gateway (IGW): Verify that the Internet Gateway is correctly attached to your default VPC. You can check this in the VPC console by selecting your default VPC and looking for the Internet Gateway ID under the "Internet Gateways" section.
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Route Table Association: Ensure that the public subnet in your default VPC is associated with the correct route table that has a route to the Internet Gateway (0.0.0.0/0 => IGW).
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Source/Destination Check: Check the "Source/Destination Check" setting on the instance in the default VPC. This should be enabled by default, but if it's disabled, it could prevent the instance from responding to traffic.
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Security Group Rules: Although you mentioned that the security group allows all traffic, double-check the rules for both inbound and outbound traffic. Sometimes, rules can be misconfigured or overwritten.
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Network Interface: Check if the network interface attached to the instance in the default VPC is correctly configured. Ensure that it has a public IP address and is associated with the correct subnet.
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Firewall Rules on your laptop or network: If you're trying to connect from a specific IP address or network, ensure that there are no firewall rules on your local machine or network that could be blocking the connection.
If you've checked all of these and the issue persists, you may want to consider creating a new default VPC and launching a new instance to see if the problem is specific to the current default VPC or the instance itself.
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I have checked all the above, and I am still not able to connect. To minimize the damage I have detached the volume of one VM and attached it to another VM to recover the data, but I really like to solve the problem, since this is not the only VM I am interested in. All the VMs in this VPC are unreachable. What is surprising is AWS reports instant connectivity check has passed for every instances in this VPC.